Other things equal, along the aggregate demand curve, a higher price level is associated with
A) an increase in the quantity of real GDP demanded.
B) a decrease in the quantity of nominal GDP demanded.
C) a decrease in the quantity of real GDP demanded.
D) higher income levels.

Question

Quizplus · Accepted Answer

When the price level increases, the demand for goods and services decreases because it becomes more expensive to buy them. This leads to a decrease in the quantity of real GDP demanded. Therefore, option C is the correct choice. Options A and D are incorrect because an increase in price level does not always mean an increase in demand for real GDP or income levels. Option B is also incorrect because nominal GDP is not affected by changes in price level, but by changes in the quantity of goods and services produced.

Other Things Equal, Along the Aggregate Demand Curve, a Higher